Credit Suisse collapse – Federal Court annuls the wiping out of 16 billion worth of Additional Tier 1 (AT1) bonds.

by onehandedbackhand

6 comments

  2. The shitshow continues…

    The court ruled there was no legal basis for the annulment. The decision can be appealed.

    Apparently the (believed to be worthless) bonds are currently trading at around 30% of their nomimal value (as per cash.ch) which means the market is pricing the ‘damage’ at around 5bn. If the taxpayers end up paying for this, expect heads to roll…

  3. It wasn’t the Federal court (TF, BGer) but rather the Federal administrative court (TAF, BVGer).

  4. I think everyone can agree that the AT1 holders got the worst deal of all involved stakeholders, legal question is now whether it was justified putting them on the chopping block to bail out the others. Certainly raised a lot of eyebrows at the time. But it’s always unpredictable how the courts see it, and I doubt us randos on Reddit will know enough to say much with certainty here.

  5. AT1 bonds were created to fail in the cases like that, and in return they provided an extra yield. The default order only looks weird when it’s explained by mass media but it was all explained in the bonds prospectus. Asian and Mid-Eastern investors happily bought them because they thought it will never fail based entirely on the branding. If the court reverses it then why were the AT1 bond holders compensated with extra yield if they didn’t end up carrying the extra risk? It sets a very dangerous precedent. 

  6. Please someone enlighten me: The requirement to write off AT1‘s is that it has to be used to create further equity for the institution. How the hell does it do fuck all but destroy any last bit of confidence in lending to that institution if AT1‘s are written off?

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